Confusion in the Debate About Inequality - Leszek Balcerowicz

Plenary Sessions

One source of confusion is the failure to distinguish inequality of opportunity from inequality of situation (wealth, income etc.). While is it easy to agree on what is the ideal inequality of opportunity (none) there is no inter-subjective agreement on what is the ideal inequality of income (wealth). With respect to the inequality of income (wealth) one should also distinguish inequality in the world (i.e. across countries) from inequality within countries.

Fighting inequality of income (wealth) should not be confused with attempts to reduce poverty. Same policies aimed at rich people would increase poverty via reducing the speed of economic growth. In assessing high incomes one should distinguish their source: inheritance, rent seeking, crony capitalism, innovation.

Important inequalities of income (wealth) stem from the wrong policies (e.g. in education, from state-imposed monopolies, restrictive zoning, etc.) but it is free markets that are commonly blamed for the rise in inequalities. Inequalities in power, especially pronounced in despotic regimes, are too often ignored.